Many business owners, small and large, provide performance incentives for their staff, eg annual bonuses, gift vouchers, time in lieu, equity schemes and the like.
But what exactly are you rewarding?
Incentive programs don’t typically reward performance, rather they reward results. Business success demands results. Fair enough, too. But, let’s go back a step.
“Most incentive programs don’t reward performance, they reward results.”
Results are outcomes, eg sales targets, profit, market share, growth, customer satisfaction. They are all business outcomes. In a cause and effect relationship, they are the effect. What then drives results? Performance drives results and is the cause in the relationship. So, what then constitutes performance and how do you measure it?
End Goals v Performance Goals
There are two types of goals. End Goals and Performance Goals.
End Goals are the outcomes or results you achieve from having done something, eg sales, turnover, profit, customer satisfaction. They are measured ex post facto (after the fact) or what are commonly referred to by management consultants as lag indicators.
Performance Goals are the drivers that get you the results, eg sales calls, customer visits, prospects, outbound calls, customer response times. These can be measured in real time and are referred to as lead indicators.
There can be considerable and costly time delays between when a lag indicator is first brought to the attention of a business owner for corrective action. Time means money. Do your performance measures include lead indicators?
Lead indicators are predictive measures of future success. And success is the cumulative effect of doing the little things day-by-day.
“Lead indicators are predictive measures of future success.”
Lead and Lag indicators form an integral part of what Harvard academics, Kaplan and Norton, call a Balanced Scorecard. Many large corporations use Balanced Scorecard measures and increasingly franchisers are too. They are equally applicable to small firms and truly are essential to driving performance to higher levels.
What drives Performance?
If performance drives results then what drives performance? Well, there are two things that drive performance:
1. skills
2. behaviour
What is the difference? A skill is learned knowledge of how to do a task whereas behaviour is a conscious/subconscious response or choice.
Ask yourself; does this person know how to complete the task? Have they ever completed the task beforehand? Have they received skills training? Have they demonstrated competency in the skill? If not, then you may have a skill deficiency that needs addressing through skills training.
On the other hand, if your employee is competent or has the necessary skills but for some reason doesn’t apply them, then you may have a behavioural issue. In which case as the manager/employer it is incumbent upon you to call them on it. Behaviours tend to run in patterns so it is likely that the employee will repeat the behaviour (at work and at home). So, you are really doing them an enormous favour long term.
In essence you bring to their conscious awareness the subconscious (or conscious) choice they have made. It now becomes their conscious choice whether to amend the behaviour or not. Either way hold them responsible for their choice and the resulting consequences.
Try these exercises:
1. Create a Performance based incentive program. Offer staff gift vouchers or lifestyle rewards based on their performance not results. Reward behaviours such as proactivity, attention to detail, customer focus, team work.
2. Ask your staff to benchmark themselves. Empower them to take responsibility for
their own performance. Nurture the talent you have within your reach. If you are self-employed benchmark your sub-contractors/ suppliers.
3. Include a lead indicator in each functional area – Sales & Marketing (customer visits, qualified prospects, customer complaints); Finance (reminder notices, daily cash position); Operations (capacity, occupancy rates); Service Delivery (response times, compliance with packing slips); People (absenteeism, timeliness, overtime).
4. Call an employee/ sub-contractor on a behavioural issue, eg coming late to work, failure to meet a deadline, failure to keep a promise. Give regular and informal praise for good behaviours.
5. Practice asking open questions. What? When? How? Engage your employee’s creative genius. Encourage them to come with solutions and not problems. You’ve got enough on your plate.
